China

Shenzhen Tencent Computer Systems Co., Ltd. V. Guangzhou NetEase Computer Systems Co., Ltd., NetEase (Hangzhou) Network Co., Ltd., China United Network Communications Limited Hubei Branch, Guangdong OPPO Mobile Telecommunications Co., Ltd. (2014) YWHZZJZ Nos. 00005 and 00005- 2, Wuhan Intermediate People’s Court of Hubei Province

Cause of action: Dispute over infringement of a right to disseminate musical works via the Internet

Collegial panel members: He Zhen | Xu Jixue | Chen Feng

Keywords: cloud music platform, preliminary injunction, right to network dissemination of information

Relevant legal provisions: Civil Procedure Law of the People’s Republic of China (as amended in 2012), article 100 Copyright Law of the People’s Republic of China, article 50

Basic facts: In a dispute over copyright arising between claimant Shenzhen Tencent Computer Systems Co., Ltd. (hereinafter “Tencent Computer Systems”) and respondents Guangzhou NetEase Computer Systems Co., Ltd. (hereinafter “Guangzhou NetEase”), NetEase (Hangzhou) Network Co., Ltd. (hereinafter “Hangzhou NetEase”), Hangzhou NetEase Leihuo Co., Ltd. (hereinafter “NetEase Leihuo”), China United Network Communications Limited Hubei Branch (hereinafter “Hubei Unicom”) and Guangdong OPPO Mobile Telecommunications Co., Ltd. (hereinafter “Guangdong OPPO”), Tencent Computer Systems filed an application for preliminary injunctions with the Wuhan Intermediate People’s Court of Hubei Province on November 10, 2014, requesting that the court order:

(a) Guangzhou NetEase, Hangzhou NetEase and NetEase Leihuo to stop the dissemination to the public via the “NetEase Cloud Music” platform (music.163.com, and its PC and mobile client) of songs in which Tencent Computer Systems enjoyed an exclusive copyright, of which there were 623, including “Where Has the Time Gone”, “The Support of Love”, “Painted Heart”, among others;

(b) Hubei Unicom to stop rendering the free data packaging service for NetEase Cloud Music; and

(c) Guangdong OPPO to stop delivering NetEase Cloud Music as a built-in feature within its OPPO-branded smartphones.

In applying for these injunctions, Tencent Computer Systems submitted relevant evidence including notarial certificates from Wuhan Qintai Notary Public Office in Hubei ((2014) EQTNZZ Nos. 13911, 14057, 15782, 15783, 15784, 15785 and 15786), music albums and printouts of related web pages, as well as Internet Protocol/Internet Communications Protocol (IP/ICP) file information inquiry results from the Ministry of Industry and Information Technology, to support the fact that the copyright in the music-andlyrics products involved (hereinafter collectively the “musical works”) belonged to Tencent. At the same time, Tencent Technology (Shenzhen) Co., Ltd., Guangzhou Branch, undertook to guarantee Tencent Computer Systems’ application by providing as security a bank deposit of RMB3 million.

Held: With regard to the application for preliminary injunctions filed and evidence submitted by Tencent Computer Systems, the Wuhan Intermediate People’s Court of Hubei Province formed a collegial panel under law. After reviewing the case, the court legally granted the following injunctions.

(a) As of the effective date of the ruling, Guangzhou NetEase, Hangzhou NetEase and NetEase Leihuo were ordered to stop providing to the public, through the “NetEase Cloud Music” platform, some 623 musical works (as listed in an appendix attached to the ruling).

(b) As of the effective date of the ruling, Hubei Unicom was ordered to stop rendering mobile network services to its mobile clients by means of the free data packaging of NetEase Cloud Music for the 623 musical works involved.

(c) Guangdong OPPO was ordered to stop disseminating the 623 musical works involved to its mobile clients by building the NetEase Cloud Music client into its smartphones branded “OPPO R830S” (contracted phones) within 10 days of the date immediately following the effective date of the ruling.

(d) The bank deposit of RMB3 million in the account opened by Tencent Technology (Shenzhen) Co., Ltd., Guangzhou Branch, at China Merchants Bank Guangzhou Branch Huanshi East Road Sub-branch (A/C No. 2005xxxxxxx0001) was to be frozen.

(e) Other injunction applications filed by Guangzhou NetEase were dismissed.

(f) Tencent Computer Systems was ordered to bring its case to court within 30 days of the ruling coming into force; otherwise, the injunctive measures specified were to be released.

After the court issued these injunctions, Hubei Unicom and Guangdong OPPO immediately stopped their allegedly infringing acts and confirmed that they would actively adhere to their injunction obligations. Guangzhou NetEase, Hangzhou NetEase and NetEase Leihuo, however, applied for permission to appeal against the injunctions to the Wuhan Intermediate People’s Court of Hubei Province. On December 3, 2014, the court reviewed their application for reconsideration in a public hearing and held that their reasons could not be established, and hence the court dismissed their application.

During the court’s review, it became apparent to Tencent Computer Systems that allegedly infringing acts were still ongoing and hence it submitted a written application to the Wuhan Intermediate People’s Court of Hubei Province asking the court to penalize the respondents for their violation of the injunctions. The court conducted a hearing, finding Guangzhou NetEase, Hangzhou NetEase and NetEase Leihuo in violation of its orders and imposing punitive measures accordingly. Upon the court’s issuance of its decision regarding the application for reconsideration, the three respondents ceased their allegedly infringing acts, pursuant to the requirements under the injunctions.

Reasoning: On reviewing the case, the Wuhan Intermediate People’s Court of Hubei Province held as follows.

(a) Based on the music copyright licensing contracts, the music albums involved and other copyright documents submitted by Tencent Computer Systems, the claimant should be entitled to the rights to network dissemination of the 623 musical works, including “Green Rose” (as listed in the appendix attached to the judgment).

(b) According to the notarial certificate ((2014) EQTNZZ No. 14057) submitted to Tencent Computer Systems by Wuhan Qintai Notary Public Office in Hubei, the respondents Guangzhou NetEase, Hangzhou NetEase and NetEase Leihuo jointly ran the NetEase Cloud Music platform (music.163.com), sponsored by Guangzhou NetEase, and communicated to the public via this platform the 623 musical works listed in the appendix attached to the judgment. The three respondents were suspected of infringing Tencent Computer Systems’ right to network dissemination of the 623 musical works.

(c) According to the contents of the notarial certificate of Wuhan Qintai Notary Public Office in Hubei ((2014) EQTNZZ No. 13911) submitted to the court by Tencent Computer Systems, it could be confirmed that the respondent Hubei Unicom cooperated with the NetEase Cloud Music platform and disseminated to its mobile clients the 623 musical works listed in the appendix, as prepared by Tencent Computer Systems, via the free data packaging of NetEase Cloud Music. These acts were suspected of infringing Tencent Computer Systems’ right to network dissemination of the musical works involved in the case.

(d) According to the contents of the notarial certificate of Wuhan Qintai Notary Public Office in Hubei ((2014) EQTNZZ No. 13911) submitted to the court by Tencent Computer Systems, Guangdong OPPO has built in a mobile client on its smartphones branded “OPPO R830S” (contracted phones) that accesses the “NetEase Cloud Music” platform for production and sales, and hence, by those means, has acquired the 623 musical works (as listed in the appendix attached to the judgment). Such acts were suspected of infringing Tencent Computer Systems’ right to network dissemination of the 623 musical works listed in the appendix.

(e) Substance specified in printouts of relevant NetEase Technology web pages, as submitted to the court by Tencent Computer Systems, included the following facts.

(i) The legal representative of Guangzhou NetEase and Hangzhou NetEase claimed that they applied various Baidu, Alibaba and Tencent (BAT) modes; Alibaba and Baidu adopted the traffic mode, while NetEase was a content provider. The aggregate profits of the three large companies (JD, Xiaomi and Qihoo 360) were still less than those of NetEase.

(ii) According to NetEase Technology’s website on August 18, 2014, NetEase Cloud Music had 40 million users; its hot songs list “English Songs that You Love to Hear” on its NetEase Cloud Music platform was played 170,000 times in only one week.

(f) The secured assets provided by the guarantor Tencent Technology (Shenzhen) Co., Ltd. Guangzhou Branch, were verified to be genuine and the court froze the bank deposits of RMB3 million that it had provided.

Considering all of these factors, the court held that Tencent Computer Systems owned the right to network dissemination of the 623 musical works listed in the appendix attached to the judgment. It found that the five respondents had made available to the public the involved musical works by means of the Internet, the free data packaging of NetEase Cloud Music in smartphones and the built-in mobile client for NetEase Cloud Music, among other things. Not only were such acts suspected of infringing Tencent Computer Systems’ right to network dissemination of these musical works, but also the respondents offered the musical works to the public in so significant a volume that they caused Tencent to suffer huge economic losses. In the view of the court and in light of the networked environment, if such acts were not prohibited in a timely manner, Guangzhou NetEase could further grow the market share that it had acquired by taking improper advantage of others’ rights, which would cause irreparable harm to Tencent Computer Systems’ interests. The court therefore ordered that all suspected infringement by all respondents via network dissemination of the 623 musical works listed in the appendix should be prohibited. The security that the guarantor provided to cover the risk of the injunctions lodged was verified and the security procedure for the application of injunctions was legitimate.

When asked for a reconsideration, Wuhan Intermediate People’s Court of Hubei Province held as follows.

(a) Upon preliminary verification by the court, Tencent Computer Systems had submitted its copyright licensing contract, music albums, song lists and other evidence of its rights, which were sufficient to support the fact that it was the exclusive owner of the right to network dissemination of the involved musical works. Considering the dissemination feature of the “NetEase Cloud Music” platform and based on the prima facie evidence of the rapid market growth of the platform, the court determined that it was not improper to hold that failure to take injunctive measures might cause irreparable losses to Tencent Computer Systems.

(b) Tencent Computer Systems had lodged an application for injunctions against Hubei Unicom, which provided the 623 musical works involved to its mobile users via the mobile service project of “free data packaging for NetEase Cloud Music” and hence was suspected of infringing Tencent Computer Systems’ right to network dissemination, and that application was related to the application for review that the respondents had filed.

(c) Other than the written statements issued by NetEase Leihuo that the platform involved was operated and managed by NetEase Leihuo independently, the three respondents who applied for review of the injunction order failed to submit any evidence that “NetEase Cloud Music” was jointly operated by the three such as may have been sufficient to overturn the injunction order. On the basis of evidence including the network domain applied by the “NetEase Cloud Music” platform, the Internet business license and NetEase Technology’s declaration that Hangzhou NetEase was the developer of the software supporting the “NetEase Cloud Music” platform, as well as the title and copyright disclaimer on the NetEase Cloud Music website, it was not inappropriate to determine that Guangzhou NetEase, Hangzhou NetEase and NetEase Leihuo jointly operated the platform.

(d) During the course of hearing the case, and as demonstrated by both the claimant and those respondents who applied for reconsideration, the musical works involved could be directly played by clicking the link code at the end of the web page provided by the “NetEase Cloud Music” platform, but such musical works could not be obtained online via the domain address provided by the three respondents. At the same time, the three respondents who applied for review failed to submit any evidence that may have supported their assertion that the “NetEase Cloud Music” platform merely provided web link technology and that the involved musical works had been lawfully licensed.

(e) Songs #216 and #217 on the list of prohibited songs attached to the judgment in the case were not copies, but musical works of the same name performed by a different artist. Other works on the list were verified to be authentic. On the basis of the musical works involved that were disseminated via the “NetEase Cloud Music” platform, the court had reason to confirm that these music products were the same as those for which Tencent Computer Systems claimed injunctions and there was no need to compare the sound sources.